Chevron to seek UK refinery sale, cut 2,000 jobs

By IBT Staff Reporter On 03/09/10 AT 12:01 PM

NEW YORK - Chevron Corp, the second-largest U.S. oil company, said it planned to put several downstream operations up for sale, including its Pembroke refinery in the UK, and eliminate 2,000 jobs this year.

Downstream market conditions are likely to be difficult for the next several years, Mike Wirth, executive vice president for Chevron's global downstream, said in a statement to its annual meeting with analysts in New York.

As it concentrates more on extracting oil and gas, Chevron is targeting 1 percent annual net production growth through 2014, before growing by between 4 percent and 5 percent in the three years after that.

John Watson, who took over as chief executive officer at the start of 2010, said its refineries were competitive, and it was the market conditions causing them problems.

Refiners across the industry have been hit hard as the global economic slowdown left them with too much capacity as demand slumped, hammering profit margins.

Wirth said he would continue to cut jobs into 2011 and expected after-tax severance charges of $150 million to $200 million in the first quarter of this year.

Chevron will further concentrate its refining and marketing -- or downstream -- portfolio in North America and Asia Pacific. It will solicit bids for certain operations in Europe, the Caribbean and Central America, and review operations in Hawaii and Africa, outside South Africa.

The Pembroke refinery in Wales has the capacity to refine about 210,000 barrels per day, and Wirth said Chevron had already received unsolicited expressions of interest in it.

Watson said the growth in oil and gas production in the middle of the coming decade would come as its portfolio shifts toward Asia and natural gas.

The company said it would approve or start up 25 upstream projects that cost at least $1 billion over the next three years, which Watson said would set the stage for growth.

Like other big oil companies, natural gas represents a growing part of Chevron's future production. Liquid reserves fell to 62 percent of the company's overall reserves in 2009, down from 66 percent a year before.

Chevron shares were down 0.2 percent at $74.50 in early trading.

Watson, who became a vice president in charge of mergers and acquisitions in 1998, told the analysts that the company had been moving away from the downstream for the past decade, selling off nearly $1 billion in assets per year on average.

While the commonly held long-term view now favors aggressive upstream investment, we held that view earlier than others, Watson said.

He said the company had been reshaped, with capital employed in upstream growing to 65 percent from 50 percent in 1999, and that share would grow further in the years ahead.

Reflecting the shift away from refining, Chevron has budgeted for 80 percent of its $21.6 billion 2010 capital spending to go toward the oil and gas production side, compared with about three-quarters for the past three years.

Larger rival Exxon Mobil Corp will outline its 2010 plans for analysts at a meeting in New York on Thursday. (Reporting by Braden Reddall; Editing by Lisa Von Ahn, Dave Zimmerman)